Selective tax, on goods harmful to health, can tax bicycles

Originally aimed at discouraging the consumption of goods and services that are harmful to health and the environment, the selective tax provided for in the proposed amendment to the Constitution (PEC) of the tax reform (45/2019) may affect an item that seems to defy logic: The bicycle.

The surcharge on vehicles loved by environmentalists, doctors and urban planners with the so-called “sin tax” is the result of an extension of the purpose of the tax promoted during the tax reform process in the Chamber of Deputies. This extension could also affect other products, from cell phones to TVs.

An article added by the rapporteur in the House, deputy Aguinaldo Ribeiro (PP-PB), gives the mechanism a second use, that of maintaining the competitiveness of products manufactured in the Manaus Free Trade Zone (ZFM), “guaranteeing favored treatment to operations originating in the region ”. To this end, it allows goods that are produced in the region to be subject to selective tax when manufactured in other areas of the country.

Faced with questions regarding the collection of selective tax on products such as bicycles, the Social Communication Secretariat of the Presidency of the Republic (Secom) released a note highlighting that the use of the tax to differentiate ZFM production was a measure adopted by Congress.

“It is worth highlighting that, in the case of these products, the Selective Tax will replace the IPI. It will not, therefore, be an additional tax”, says the statement. “Furthermore, in these cases, at most the rate that is already applied today in the IPI will apply – which, in the case of bicycles, ranges from 6.5% to 10% –, and not the same rate to be applied to alcoholic beverages. and cigarettes”, he adds.

“It is also important to highlight that companies that manufacture bicycles will benefit from the model provided for in the Tax Reform, as it puts an end to a series of distortions in the current system, which harm the competitiveness of the industry”, says Secom.

According to Ribeiro, the solution was adopted because the Tax on Industrialized Products (IPI), which currently has a reduced rate for goods produced in the ZFM, will be extinguished with the tax reform.

Other items that may be surcharged by replacing the IPI with the selective tax include motorcycles, smartphones, TVs, notebooks and air conditioning units, for example. The contradiction surrounding the incidence of the “sin tax” on bicycles, however, is what has generated dissatisfaction among bicycle enthusiasts.

Entity forms a petition and wants an amendment against bicycle taxation

Aliança Bike, an association that brings together more than 180 manufacturers, assemblers, importers, distributors and retailers in the sector, published a technical note according to which surcharges on bicycles should reach 82% of all national production and 98.7% of all companies in the manufacturing sector, which employ 87.5% of all labor in this activity.

According to the 2022 Annual Survey of Bicycle Retail Trade, produced by the entity, more than 70% of bicycles consumed in Brazil have a price between R$800 and R$2,500 – considered entry-level bicycles, which are cheaper.

According to the document, this price range is fully met by automakers spread across the country. “Therefore, the selective tax applied to bicycles will have direct negative impacts on access to bicycles with more expensive and inaccessible products and will have an even more harmful effect on the lowest-income population in the country”, says the note.

The entity is trying to convince senators to remove the product from the items on which the extra-fiscal tax should be levied, with the justification that bicycles “notably contribute to health and help combat climate change”.

One of the instruments the movement used was a petition that tries to pressure parliamentarians to change the wording of the controversial article “to remove, once and for all, products that effectively promote health and contribute to tackling the climate crisis from incidence of selective tax”. To date, the list already has more than 27 thousand signatures.

Aliança Bike also intends to suggest an amendment that excludes the possibility of the selective tax falling on products that benefit human health and the environment.

The text of the tax reform PEC can still be modified in the Senate, where the rapporteur of the matter, Eduardo Braga (MDB-AM), intends to present his opinion between this and next week.

This Wednesday (18), the senator said he was studying alternatives to separate the debates on the selective tax and the competitiveness of the ZFM. One option would be to compensate the region’s benefits with contributions that are not being achieved by the reform, reported the newspaper “Valor Econômico”.

An example cited would be a specific Contribution on Intervention in the Economic Domain (Cide). The maintenance of the IPI would be ruled out, according to the parliamentarian.

Items that will be affected by the selective tax will be defined by complementary law

The complete list of items that must be taxed with the “sin tax” will be defined through a complementary law, after the approval of the PEC by the Legislature, which has provoked criticism from the opposition.

According to the text, it will be up to the Union to impose taxes on the “production, sale or import of goods and services harmful to health or the environment, in accordance with the law”, with the Executive having the power to change the rates of the new tax.

Still according to the wording of the PEC approved by the Chamber, the selective tax would not apply to exports and would be part of the calculation basis of the Value Added Tax (VAT), resulting from the unification of IPI, PIS, Cofins, ICMS and ISS in the reform. The deadline for the transition from the current IPI model to the selective tax model is not clear in the current text of the reform.